High-skilled guestworker programs: Good or bad for U.S. workers?

By Pamela Wolf, J.D.
The Senate Judiciary Committee’s Subcommittee on Immigration and the National Interest held a hearing on February 25 that addressed concerns about programs and policies related to high-skilled foreign workers, focusing largely on the H-1B program. The panel of invited witnesses pointed to various concerns about guestworker programs, including immigration abuses that displace U.S. workers, and short-sighted employers and industries that fuel negative impacts. At least one witness, however, urged against curbing the H-1B program, pointing to research showing that “highly-educated immigrants increase American wages, employment, and productivity.”
U.S. workers displaced. The hearing, “The Impact of High-Skilled Immigration on U.S. Workers,” came just a month after a pair of former Walt Disney World IT employees launched separate class action lawsuits alleging that Disney and two different companies who sponsored visa holders engaged in unlawful RICO conspiracies to displace U.S. workers and replace them with cheaper H 1-B visa holders. The complaint illustrates what has reportedly been experienced by other workers in a trend that has become disconcerting in certain industries.
Purportedly, 200-300 Disney IT employees were told that they were being fired on January 30, 2015, and had 90 days to train their visa-holder replacements. If they refused to train their replacements, who would be provided by either Cognizant Technology Solutions or HCL, Inc., they would forgo a bonus and severance. Those replaced workers, who were allegedly told there were other positions for which they could apply, were purportedly blackballed from rehire for at least a year.
“When used correctly, high-skilled foreign worker programs can help grow our economy and spur job creation in ways that benefit all Americans,” Senator Patrick Leahy (D-Vt.), Ranking Member of the Senate Judiciary Committee said in prepared remarks. “That is why I have been deeply troubled to hear recent stories about practices that have led to the dismissal of American workers in exchange for the hiring of foreign workers at various companies.”
“When immigrant visa programs are misused to depress the wages of American workers and outsource jobs, all workers suffer,” Leahy observed. “These programs should be used to help create opportunities in America, not displace them, but the current allocation system does nothing to achieve that result.” Leahy urged Congress to act on immigration reform.
Headed the wrong way. Over the past year, the divide between evidence and policy has grown wider and deeper, according to Professor Hal Salzman, Ph.D., E.J. Bloustein School of Planning & Public Policy, J.J. Heldrich Center for Workforce Development at Rutgers University. The United States has witnessed a weakening of its STEM (science, technology, engineering and math skills) workforce “through policies and guestworker programs that are increasingly exploited by shortsighted firms and industry groups.”
Salzman said that despite rigorous and independent research by him and his colleagues of a decade-plus of research showing the United States educates a sufficient supply of qualified STEM workers, there has been a continued expansion of policies that shift work to offshore labor.
“Instead of developing a globally competitive and internationally integrated workforce, all evidence and events from the past year suggest we are heading down a very different path consisting of legislation, policies, and programs to substitute guestworkers for U.S. STEM workers and graduates,” he suggested. “These are programs that allow firms to subvert the free market in setting wage rates; these are policies that deny U.S. workers–whether native or immigrant, whether citizen or permanent resident—the career and compensation their education and skills should bring them if not for the huge, congressionally-created labor pool of guestworkers that industry has available to staff the vast majority of new IT openings.”
Good for American workers? But not all witnesses at the hearing thought guestworker programs should be scaled back. Chad Sparber, an associate professor and chair of the economics department at Colgate University, pointed to what he called a “tremendous amount of economics literature” finding that “on average, highly-educated immigrants increase American wages, employment, and productivity.” Sparber cited two reasons for this effect:

Among highly-educated workers, immigrants have a comparative advantage in STEM work. Even within science fields, immigrants are more likely to earn a degree in engineering, computer science, and mathematics, whereas native-born Americans are more likely to major in life sciences and psychology. That means:

Immigrants and native-born Americans do not directly compete with each other for jobs in the same way that a lot of people might imagine, and

When foreign-born STEM workers enter the U.S. labor force, it creates an opportunity for native-born workers to respond by doing other types of work including managerial occupations that often—though not always—pay higher wages.

Immigrants specialize in science and engineering work. Scientists and engineers are responsible for most of the technological progress in recent decades. Technology creates gains that spill over to many sectors of the economy, and is the key to generating long-term, sustained, economic growth. If you accept that chain of logic, as most economists do, then you can see that immigrants are vital to American economic growth. Quantitatively, immigrants were responsible for two-thirds of STEM workforce growth between 1990 and 2010, and about one-third of the productivity growth of the American economy over the same period.

According to Sparber, “the rise in foreign STEM employment between 1990 and 2010 increased the inflation-adjusted wage growth rate of college-educated natives by about 3.7 percentage points above what it otherwise would have been. For context, that is equivalent to about one third of college-educated wage growth during that period.” He said these figures by themselves “attest to the problems associated with our current limits to high-skilled immigration.”
Although his and his colleagues’ work find economic gains for the average worker and the economy as a whole, Sparber acknowledged that immigration is not a cost-free proposition. “If some groups are negatively affected, we should develop ways to assist them,” he suggested. “Reduced immigration is a counter-productive non-solution because it harms the country on average.”
“Extraordinarily profitable” to use guestworkers. Ronil Hira, Ph.D., P.E., Associate Professor of Public Policy at Howard University, explained how “extraordinarily profitable” it is to replace, and substitute for, American workers with H-1B and L-1 (managers, executives or those with specialized knowledge employed by a foreign business entity) workers. “Firms that rely mostly on H-1Bs are able to generate net profit margins of 20-25% in a sector, Information Technology (IT) Services, where we would expect profit margins of 6-8%,” he said. “Exploitation of the H-1B and L-1 visa programs has completely disrupted the IT Services sector. Employers that hire American workers are put at a competitive disadvantage solely because of the loopholes in the H-1B and L-1 programs allowing employers to pay guestworkers less.”
Proposed solutions. Solving the problems with the H-1B, L-1, and OPT (temporary employment directly related to an F-1 student’s major area of study) guestworker programs is straightforward, according to Hira, who suggested these solutions:

Raising the wage floors substantially. Guestworkers should not be hired because they are cheaper than Americans.

Employers should make a bona fide effort to recruit and hire qualified American workers prior to hiring a guestworker.

American workers should not be displaced by guestworkers.

Employer compliance should be ensured through independent government audits.

Hira also highlighted three bills already introduced in Congress that he said “provide sensible solutions that would result in significant improvements in the programs they target”: the H-1B and L-1 Visa Reform Act of 2015 (S.2266); the American Jobs First Act of 2015 (S.2394); and the Protecting American Jobs Act (S.2365).

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